Poor Richard Goes to London: The Economic Ideas of Benjamin Franklin

Another episode of my podcast on The Worldly Philosophers Go to Washington: From Alexander Hamilton to Janet Yellen. The ideas of early classical political economists and their influence in America are analyzed in this episode. The role of Sir William Petty’s ideas in the development of Benjamin Franklin’s early policy proposals is discussed. It is noted how Franklin had a firm grasp of the main economic theories of his time, even before some of these ideas were fully developed in Europe, by the Physiocrats and Adam Smith. In fact, some of Franklin’s original ideas influenced European political economists. The notion that the influence of economics is a recent phenomenon cannot be supported by the evidence.

Ben Franklin, Consumption and the Industrial Revolution

The idea that demand expansion was central for the Industrial Revolution, in Keynesian fashion, was at some point dominant among economic historians. It was, for example, explicit in both Phyllis Deane and David Landes famous books about it, both published in 1969 (The First Industrial Revolution and The Unbound Prometheus, respectively).

It is also well-known that Adam Smith recognized that productivity growth (the division of labor) was limited by the extent of the market (demand), so that growth and the wealth of nations, which depended on productivity growth, and not on the accumulation of foreign reserves (gold) or trade surpluses as defended by Mercantilists, was in a sense demand-led.

Ben Franklin is not often cited in relation to his economic writings, but he was knowledgeable in the main developments of his time.  He was both a defender of the labor theory of value, and of paper currency in his famous A Modest Enquiry into the Nature and Necessity of a Paper-Currency, and the consensus is that his ideas came essentially from William Petty, the father of the surplus approach according to Marx.

As it turns out Franklin had also something to say about the role of demand in the process of industrialization in Britain. He said in Observations Concerning the Increase of Mankind, Peopling of Countries, etc. (here) that:

"But in Proportion to the Increase of the Colonies, a vast Demand is growing for British Manufactures, a glorious Market wholly in the Power of Britain, in which Foreigners cannot interfere, which will increase in a short Time even beyond her Power of supplying, tho' her whole Trade should be to her Colonies."

In other words, he suggests that the role of higher demand by the colonies was essential in the process of industrialization. I should note that there is no consensus among those that defend the demand side story of the industrial revolution between domestic demand or foreign demand, but increasingly the literature associated to the changes in the patterns of consumption in Britain suggests that it was domestic markets (e.g. Maxine Berg and her discussion of the consumer revolution).